Smart Governance in a Smart NationA Singapore perspective

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Good corporate governance is about ‘intellectual honesty’ and not just sticking to rules and regulations; capital flowed towards companies that practiced this type of good governance

CGF Research Institute

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Introduction

Transparency and integrity lie at the heart of a progressive society and nation. According to Mervyn King, Chairman of the King Report - “Good corporate governance is about ‘intellectual honesty’ and not just sticking to rules and regulations; capital flowed towards companies that practiced this type of good governance“ (CGF Research Institute Pty Ltd). Ann Crotty of Business Day further adds “It is essential that the activities of corporate executives are under constant, vigorous and public scrutiny, because those activities are crucial to the economic well-being of society. If anything, developments both locally and internationally during 2001 have emphasised the need to continuously update and upgrade corporate governance standards,“ (CGF Research Institute Pty Ltd). In this world of fast-paced growth and ongoing uneven change, unprecedented strategic risks associated with corporate governance must be mitigated.

Source: Corruption Perceptions Index, Transparency International Press Office, 2014

Corruption Perceptions Index 2014

Denmark, which tops the list in the 2014 Transparency International Corruption Perceptions Index, is noted for its strong rule of law, support of civil society and clear rules governing the behavior of those in public positions. It has gone further and set an example in November 2014, announcing plans to create a public register including beneficial ownership information for all companies incorporated in Denmark. This measure will make it harder for the corrupt to hide behind companies registered in another person’s name (Transparency International Press Office, 2014).

The 2014 Corruption Perceptions Index scores more than two thirds of the 175 countries with an index score below 50 – on a scale of 0 (perceived to be highly corrupt) to 100 (perceived as very clean). The index is based on expert opinions of public sector corruption. Countries’ scores can be helped by open government where the public can hold leaders to accountability. Singapore is listed as No. 7 in the same index and this reflects the positive opinions of the experts in terms of Singapore’s good governance and accountability in the public sector.

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The Singapore brand: core values What is the Singapore Brand? The strength of a brand’s emotional manifestation is undeniable: think of Singapore Airlines and chances are you will get the feeling of reliability and expectations of high service standards. If you think about Singapore, images of skyscrapers and clean streets as well as a feeling of security and clean governance will surely come to mind.

However, a core part of the Singapore success story and the value of the Singapore brand is its underlying good governance and core systems. Singapore’s continuous emphasis on integrity, confidence and trust is made material in the form of an established governance structure and its embodying system.

Back in 2006, Lee Kuan Yew said that Singapore was a known brand name and other countries wanted to adopt its systems. As recent as 2014, the Singapore government pledged to uphold good governance, which it said is a key pillar to Singapore’s success.

If Singapore has no skyscrapers and no clean streets but it retains its well-known good governance system, chances are it would still do better than vice versa. Many see this as the true lasting legacy of Singapore’s founding father Lee Kuan Yew and one of Singapore’s core value and attractions.

So business leaders: how much would your business benefit from a brand which enjoys the foundation of good governance systems?

The uncertain future Uncertainties are the only certainty when predicting the future. The future brings about increasingly complex realities and issues facing the world, economies, businesses and people.

As Singapore celebrates its 50th year of independence in 2015, there are already discussions about the next 50 years; for example the Future 50 launched by Singapore Institute of International Affairs (“SIIA”) which was established back in 2013. Based on business

leaders’ opinions canvassed by SIIA, Singapore is much praised for its success for the past 50 years and they are confident of Singapore’s continued success. However, Singapore’s future hinges on its continued economic growth and the ability of its hardware (infrastructure, facilities) as well as software (knowledgeable workforce, creativity) to continue to work well and improve with future needs.

This simply means that Singapore in the next 50 years will not depend on resources which it does not have now. Its continued success and resiliency will depend on the perfection and improvements of its existing success factors and the fruition upon maturity of these factors.

Singapore has always been and will always be a small ‘red dot’ but the Singapore Brand enables it to carve a niche for itself in the global landscape. The principles which have enabled Singapore to grow its hardware and software is succinctly described by a business leader’s tribute to Lee Kuan Yew’s legacy: “He established good governance, the rule of law and meritocracy that enabled Singapore to grow and prosper”.

At the end of the day, the main benefit of good governance is the trust and assurance one is able to obtain, executed by leadership through integrity.

Governance: institutionalise trust and bring assuranceWithout trust, there is no assurance. The very point of assurance is to provide confidence and trust is a pre requisite. Trust is an increasingly valuable commodity, especially in a world where businesses are constantly expanding and responding to changes in environments and needs. Investment and management decisions could not be made without the assurance of trustworthy information or the underlying confidence and trust of a successful execution.

Trust is also a key driver of brand success and loyalty among customers. When we buy a product or service, one common consideration is the trust and assurance we have in the quality expected of the brand. More often than not, a consumer buys what he trusts the brand represents.

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The convergence of good governance principles and processes, enabled by smart technologies, are the essential elements of Smart Governance required in a Smart Nation.

How do we institutionalise trust in a business to bring about assurance to the business leaders and its customers?

People are surely an integral component and yet we often hear how we should trust the systems in place rather than the people.

For each nut and bolt to work as a system, a governance structure needs to be in place. The structure provides the necessary direction and specifications of a relevant system. To this end, the governance structure houses policies, institutions and processes to enable governing duty, monitoring and continuously improving the said system.

Any well-designed system is holistic and is an organised connection of different components (people, entities, assets etc) via procedures/routines/practices to perform an activity. A system needs to take into account various concerns and areas of priority of a business, such as productivity, quality assurance, anti-fraud, financial and monetary related etc. We term this the “House of Governance” in our Deloitte Smart Governance 3.0 model. This House of Governance and its system serves to safeguard the trust which provides businesses the assurance they need in their survival and their success.

Smart Nation, Smart GovernanceSingapore’s vision of a Smart Nation, as stated by the Prime Minister Lee Hsien Loong on 24 November 2014, is “a nation where people live meaningful and fulfilled lives, enabled seamlessly by technology, offering exciting opportunities for all.”

The role of technology as the enabler for a Smart Nation is not surprising and harnessing technology to improve on governance is more evolutionary than revolutionary.

Governance as a concept is not difficult, but so much is built of so many varying components that sometimes people feel that it is like a castle in the air. While the outcome is clear, the tangible form of a governance structure is not. The Code of Corporate Governance 2012 helped to provide clear guidelines and references for the Board of Directors and is a great example of how such a structure could take form.

Governance for a business goes broader and deeper. It needs to take into account strategic, financial, operational and regulatory aspects while being able to meet its stakeholders’ requirements and manage its value drivers and associated risks.

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Deloitte’s Smart Governance 3.0 modelIn realising the principles of Smart Governance, professional risk specialists are looking towards leveraging the latest technology capabilities to bring about an ease of access of governance related information and solutions. It could be visualised as a digital platform where business leaders could turn to address their governance-related needs. Essentially, the Smart Governance model enables the House of Governance.

We envisage that the building blocks of the Smart Governance model comprises the following key smart capabilities:

Risk sensing and analyticsAs the business environment constantly evolves at a pace that is unprecedented, there is a need to bring real-time risk sensing capabilities and analytics to the finger-tips of business leaders. The latest current affairs in the form of cutting edge news, expert opinions and applied thought leaderships are now readily accessible given the power of digital technologies and social media.

Such accessibility to information and real-time big data however needs to be collated, managed, analysed and presented to the relevance of the needs of the organisation. If managed in the right way, this new approach unleashes the potential of an organisation by putting the predictive capabilities and foresight seamlessly into the hands of business leaders. The end product is empowerment of our people in organisations to shape and govern policies, monitor outcomes, and enable continuous improvement in the areas of governance.

Governance risk mapDifferent organisations at different growth stages have varying maturity levels in meeting governance requirements. The governance risk map is designed to crystalise the connection between areas of risk governance and the mitigating actions to take. It can serve as a starting place to help organisations navigate through the House of Governance to identify potential bridging gaps, across the spectrum of strategic, operational, process, technology and talent areas of governance.

Technological enablersThe role of technology in this digital evolution is a central one as the key enabler for the Smart Governance platform. Risk solutions and services are to be redefined and delivered alongside the ever-changing technological capabilities to support our future organisations. One such example is the automating of audit/review processes which will offer tremendous value to future organisations in providing governance and compliance to their stakeholders while improving quality and reducing cost of service at the same time.

Risk intelligence, brought about by the ongoing development and application of artificial intelligence (AI), further improves the capability and insights of the technology platforms.

How are we able to unlock the value of governance through cloud-based analytic solutions, to achieve improved findings with continuous monitoring? The potential of remote auditing and solutioning are also made possible, offering risk practitioners improved productivity beyond the limitation of physical distance, time and space.

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The Future of Governance The success of Singapore, a well governed nation as evidenced in the past and present ranking of the Corruption Perception Index cannot be taken for granted. Beyond SG50, Singapore is still very much in its continuous journey of maintaining and improving its brand position in the regional and global landscape. It has already established itself to be a trusted place to do business, where infrastructure & governance system is good and there is an existing knowledgeable workforce and an envious safety and security record.

The weaknesses of Singapore will not change in the next 50 years and beyond. Singapore will continue not to have natural resources and a lack of land as well as manpower. But what it has always targeted in and what it has always succeeded in achieving, is being a preferred place to do business.

Deloitte’s Smart Governance 3.0 model

Process and System

Smart capabilities

Trust & Assurance

Convergence of professional specialists with technology

House of Governance

Policies Govern Monitor Continuous improvement

Assets Practices Entities Routines PeopleProcedures

Risk Sensingand Analytics

Governance Risk Map Technological Enablers

The Smart Nation initiative is strategically aligned to enable this. Deloitte’s Smart Governance model is thus designed to be the first step in this important direction, driven by shared themes of ethics/integrity, trust and assurance.

The journey of convergence of technology with business has long begun and now it is time for this next phase where the breadth and the depth of the value of governance are housed within the Smart Governance platform, just a few clicks away.

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© 2015 Deloitte & Touche Enterprise Risk Services Pte Ltd

Contacts

Dr Janson YapRegional Managing PartnerEnterprise Risk Services+65 6216 3119jansonyap@deloitte.com

David ChewExecutive DirectorEnterprise Risk Services+65 6216 3271dchew@deloitte.com

Lex LeeDirectorEnterprise Risk Services+65 6216 3125lexlee@deloitte.com